The Risk Adjustment Scoring Scam — A Medicare (Dis) Advantage

Medicare Advantage, a managed care program created to save the government money, is losing anywhere from $2 billion to $10 billion a year from overbilling.That’s the staggering conclusion by the National Bureau of Economic Research (NBER), which recently published a report analyzing how private insurance companies that run Medicare Advantage health plans may be gaming the system to inflate so-called “risk adjustment” payments they receive from the government.Medicare Advantage was supposed to realize cost savings by shifting government healthcare spending from a “fee-for-service” model to a capitated managed care approach. More than 17 million people are enrolled in Medicare Advantage plans — about a third of those eligible for Medicare.The capitation payments to private insurers are based, in part, on the enrollees’ health risks. Payments to Medicare Advantage plans are influenced by “risk scores” that take into account differences in patients’ medical diagnoses and health outcomes. The sicker the patient, the higher the “risk score” assigned. For example, a depression diagnosis that is reclassified as a “major” depression would receive a higher risk score. Higher risk scores, in turn, generate increased risk adjustment payments by the federal government to the Medicare Advantage insurance plans.

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